Money 

1. Silver coins have tended to disappear from circulation in the U.S. because:

A. people prefer the use of credit cards and checking accounts.

B. silver has fallen in value so that the coins are worth less than their face value.

C. "good money drives out bad money".

D. silver has risen in value so the coins are worth more than their face value.

E. the cost of minting the silver coins has risen so much that it is no longer worthwhile to mint them.

2. The precautionary demand for money:

A. varies inversely with the price level.

B. varies inversely with the level of income.

C. is positively and strongly related to the interest rate.

D. is a result of the unavailability of adequate insurance.

E. arises from the possibilities of uncertain expenditures and/or uncertain income.

3. There will be an increase in nominal money demand due to increased transactions demand except when:

A. national income increases.

B. the price level increases.

C. there is a change from weekly to monthly paydays.

D. the market interest rate falls.

E. all of the above cause transaction demand for money to increase.

4. The total demand for money cannot include:

A. transaction demand.

B. bond demand.

C. precaution demand.

D. speculative demand.

E. demand for money to be used as a financial asset.

5. Money is not:

A. a medium of exchange.

B. a unit of account.

C. a store of value.

D. a standard of deferred payment.

E. the exclusive means of holding wealth or assets.

6. Consider the following three statements:

I. The US money supply equals excess reserves plus demand deposits.

II. Most of the US money supply consists of demand deposits.

III. The money supply would grow if everyone deposited all their cash into checking accounts in banks.

A. all three statements are true.

B. all three statements are false.

C. I is true while II and III are false.

D. I is false while II and III are true.

E. II is true while I and III are false.

7. If no currency exists outside bank vaults and banks loan exactly 80 percent of total reserves, then there will be:

A. "runs" on banks.

B. five times as much money as reserves.

C. excess liquidity.

D. inflation.

E. financial collapse.

8. The potential money multiplier equals:

A. 1 divided by excess reserves.

B. 1 divided by the marginal propensity to save.

C. 1 divided by the marginal propensity to consume.

D. 1 divided by the excess reserve ratio.

E. 1 divided by the required reserve ratio.

9. The total amount of money (the money supply) in the economy equals:

A. only that which has physical existence such as currency and coins.

B. only that which exists in the banking system such as demand deposits.

C. monetary base divided by the money multiplier.

D. money multiplier divided by the monetary base.

E. none of the above.

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